The question

In a Deposit Return Scheme (DRS), money is constantly moving:

• Deposits are added to drink prices and collected at the till.
• Deposits are refunded when containers are returned.
• Handling fees are paid to retailers for running return points.

At the centre sits the scheme operator (in the UK, the UK Deposit Management Organisation Ltd – UK DMO, https://dmouk.com/), which must ensure the system is financially and operationally stable.

The key questions for a retailer’s finance and shared‑services teams are:

• How do these flows look from our P&L and cash‑flow perspective?
• How does the “double entry” with the DMO actually work?
• What happens to unredeemed deposits in the early years when return rates are below target?
• What reporting and reconciliation processes do we need to put in place?

The basic mechanics: deposit in, deposit out

At its core, a DRS is simple:

1. At purchase

   • A deposit (for example £0.20) is added to the price of each in‑scope drink container.
   • The retailer collects this deposit from the consumer at the point of sale.

2. At return

   • The consumer brings the empty container back to a return point (store, RVM, depot).
   • The deposit is refunded, typically via:
     • A voucher issued by an RVM and redeemed at the till, or
     • A direct cash/card refund or credit.

The DRS is intended to drive return rates towards 90% or more over time; UK regulations set staged targets (for example 70%, 80%, 90% in successive years) for return rates. High‑performing systems around the world already achieve above 90% in practice, with Germany often cited at around 98%.

The retailer–DMO “double entry” logic

From a retailer’s perspective, the scheme operator (DMO) effectively maintains a double‑entry account:

• When you sell a drink

  • You collect the deposit from the customer.
  • Economically, this creates a debt to the DMO:
    • The system as a whole owes that customer a refund, somewhere, when the container is returned.

• When you accept a return and refund the deposit

  • You pay the deposit back to the customer (via voucher or till).
  • Economically, this creates a credit from the DMO to you:
    • You have fronted the cash on behalf of the system and are owed that deposit back, plus any agreed handling fee.

Over a settlement period (for example weekly or monthly):

• The retailer reports:

  • Deposits collected on sales (by SKU or category).
  • Deposits refunded on returns (linked to RVMs and any manual return points).

• The DMO compares these with:

  • RVM event data (via fleet portals like RecyHub).
  • Counting‑centre data (bags, weights, container counts).
  • Producer and distributor sales reports.

• The DMO then:

  • Calculates the net position for each retailer (deposits net of refunds, plus handling fees).
  • Initiates a money transfer either from retailer to DMO or from DMO to retailer, depending on who is “ahead” in the double entry.

From your P&L and cash‑flow perspective:

• Deposits collected at the till should not be treated as revenue; they are balance‑sheet items that will, in large part, flow through to the DMO and to consumers as refunds.
• Handling fees and any media or promotional revenues associated with RVMs are the true P&L lines you can rely on.

Day‑by‑day: how cash builds and flows

To make this tangible, imagine DRS go‑live:

• Day 1

  • All in‑scope drinks are sold with an extra £0.20 deposit.
  • You collect deposits on all relevant sales; returns volumes are initially very low because the first purchased drinks have not yet been consumed.
  • Your bank balance shows a build‑up of deposit cash.

• Day 2

  • You continue selling drinks and collecting deposits.
  • Some containers from Day 1 now start to come back; you refund those deposits at the RVM/till.
  • Net, you are still likely collecting more in deposits than you are refunding, especially in the very early days.

• As weeks go by

  • Sales and returns begin to settle into a pattern.

  • Over a given period, the relationship between:

    • Deposits collected on sales, and
    • Deposits refunded on returns

    depends on the return rate (70%, 80%, 90%, etc.) and the timing of consumption.

The DMO’s role is to:

• Manage this timing difference at system level.
• Ensure the scheme remains liquid and solvent.
• Use unredeemed deposits and producer fees to fund operations, investments and obligations.

For UK DRS, the DMO is explicitly tasked with meeting staged return‑rate targets (for example 70%, 80%, 90%) over defined years.

Unredeemed deposits: early years vs mature system

In practice, no DRS ever achieves 100% returns. In the early years, return rates ramp up:

• Year 1: perhaps around 70% of containers are returned; 30% of deposits remain unredeemed.
• Year 2: around 80% returned; 20% unredeemed.
• Year 3: around 90% returned; 10% unredeemed.
• Later years: strong systems aim towards 95–99% returns; unredeemed deposits shrink significantly.

Unredeemed deposits:

• Initially provide a positive cash position for the DMO.
• Are often used (within the regulatory framework) to:
  • Fund scheme infrastructure and operations.
  • Invest in counting centres, data systems, logistics.
  • Provide a buffer against volatility.

However, by the time the scheme:

• Approaches 95–99% return rates, and
• Has fulfilled its primary investment needs,

there is much less “spare” deposit cash. At that stage, the system must rely primarily on:

• Producer fees.
• Material revenues from selling sorted PET, aluminium, etc.
• Ongoing operational efficiencies.

For retailers, the key takeaway is:

• Do not plan your business case around “sharing” unredeemed deposits.
• Focus on the handling fee, and any commercial value you can extract (for example from RVM media and loyalty), as your predictable income sources.

Registration and reporting: retailers, return points and RVM fleets

To make the double entry work, the DMO requires:

• Retailer registration

  • Any business placing drinks on the market and operating return points must register with the DMO and provide relevant data.

• Return‑point registration

  • Each collection point—including every RVM—must be uniquely identified and authorised as an official return point.
  • This allows the DMO to link returned containers and refunds to specific locations.

• Periodic data submissions from retailers, including:

  • Sales volumes of in‑scope containers (deposits collected).
  • Returns and refunds (by return point, including RVMs and any manual counters).
  • Summary financial information.

The DMO then cross‑checks this with:

• RVM fleet event data (via portals such as RecyHub).
• Logistics and counting‑centre data (bag IDs, weights, container counts).

This three‑way reconciliation (retailer reports, RVM data, counting‑centre outcomes) underpins:

• The integrity of settlement calculations.
• Fraud detection and investigation.
• Confidence for producers, regulators and retailers that the scheme is functioning correctly.

What finance and shared‑services teams need to prepare

To avoid reconciliation headaches and cash‑management surprises, finance and shared‑service teams should:

1. Define a clear accounting treatment for deposits

   • Treat deposits as liabilities, not revenue.
   • Track them in dedicated accounts so flows to and from the DMO are transparent.

2. Integrate RVM and POS data flows

   • Ensure that:
     • RVM voucher issuance and redemption are fully captured in POS and ERP.
     • RVM fleet data (from the supplier’s portal) can be reconciled to store‑level financials.

3. Align reporting cycles with the DMO

   • Build internal processes to:
     • Extract and validate sales and return data on the DMO’s timetable.
     • Reconcile DMO settlement statements with internal ledgers.

4. Plan for timing differences

   • Recognise that:
     • Deposit cash will build up before returns catch up.
     • Settlement with the DMO may lag by a defined period (for example monthly).
   • Manage working capital accordingly.

5. Collaborate closely with operations and IT

   • Ensure that:
     • Every RVM and manual return point is properly registered and configured.
     • SOPs in stores match what the finance team expects (for example bag sealing, coding, and event logging).

Learning from international experience

Other DRS operators worldwide (for example systems in the Nordics, Germany, and provinces like British Columbia in Canada) show that:

• Well‑designed schemes can reach and sustain return rates of 90%+ and significantly reduce litter and landfill.
• The scheme operator’s careful management of unredeemed deposits, producer fees and material sales is key to long‑term financial stability.
• Retailers that invest early in robust RVM infrastructure and data integration tend to experience fewer reconciliation problems and gain more value from handling fees and associated commercial opportunities.

Summary

From your P&L and cash‑flow standpoint, a DRS behaves like this:

• Deposits collected at sale create a liability to the DMO and, indirectly, to consumers.
• Deposits refunded at return create a receivable from the DMO, which is settled on a cycle along with handling fees.
• Unredeemed deposits initially provide a buffer for the DMO but should not be treated as part of the retailer’s business case.
• Accurate registration, data flows and reconciliation between sales, returns, RVM events and counting‑centre outputs are essential to avoid mismatches.

If your finance and shared‑services teams understand and design for this double‑entry logic—backed by solid RVM technology and a capable scheme operator such as UK DMO—the DRS can be integrated cleanly into your P&L, cash‑flow and reporting framework rather than becoming a permanent source of friction.